About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Eastern Cape High Court, Port Elizabeth
SAFLII
>>
Databases
>>
South Africa: Eastern Cape High Court, Port Elizabeth
>>
2012
>>
[2012] ZAECPEHC 1
|
|
First Rand Bank Ltd v Janse Van Rensburg (3846/2011, 3847/2011) [2012] ZAECPEHC 1; [2012] 2 All SA 186 (ECP) (17 January 2012)
IN THE HIGH COURT OF
SOUTH AFRICA
(EASTERN CAPE, PORT
ELIZABETH)
CASE NO: 3846/2011
Date
Heard: 10 January 2012
Date
Delivered: 17 January 2012
REPORTABLE
In the matter between:
FIRST RAND BANK
LIMITED
…............................................................................
Applicant
and
HEINRICH JANSE VAN
RENSBURG
…............................................................
Respondent
and
CASE NO: 3847/2011
Date
Heard: 10 January 2012
Date
Delivered: 17 January 2012
In the matter between:
FIRST RAND BANK
LIMITED
…............................................................................
Applicant
and
AZELLE JANSE VAN
RENSBURG
…...............................................................
Respondent
______________________________________________________________________
JUDGMENT
______________________________________________________________________
GOOSEN, J:
The applicant moved for
a provisional order of sequestration against each of the respondents
in two separate unopposed applications
before me. The respondents
are married to each other out of community of property. In each
application reliance was placed on
section 8(g) of the Insolvency
Act (Act 24 of 1936, as amended) it being alleged that the
respondents had committed an act of
insolvency by applying, in terms
of section 86 of the National Credit Act (Act 34 of 2005,
hereinafter the NCA), for debt review
in terms of the NCA.
Although the
applications were moved separately, the legal and factual issues
raised in the matters are identical. I have therefore
prepared a
single judgment dealing with these issues.
The applicant is a
registered credit provider in terms of the NCA. During or about 2002
the applicant lent and advanced funds
to a close corporation, Niqua
Juices CC (hereinafter the Corporation), in which each of the
respondents holds a 50% membership
interest. The application papers
disclose that the close corporation is indebted to the applicant in
the sum of R638,790.22.
This is evidenced by a certificate of
balance certified by the Commercial Recoveries Manager of the
applicant. It is apposite
to note that the papers contain no
averments regarding, or documents supporting, the existence of the
debt due by the Corporation
other than that it is due.
On 20 February 2002 each
of the respondents entered into a Deed of Suretyship in respect of
the indebtedness of the Corporation
to the applicant. The applicant
further obtained security for the suretyship liability by way of a
general covering bond over
an immoveable property owned by the
respondents. The covering mortgage bond provides security in an
amount of R600,000.00 together
with an additional amount of
R120,000.00
1
.
In each instance the
applicant’s application for a provisional sequestration order
is founded solely upon the alleged commission
of an act of
insolvency in terms of section 8(g) of the Insolvency Act. In this
regard it is alleged that each of the respondents
has made
application for an order in terms of section 86(7)(c) of the NCA for
a declaration of over-indebtedness (as envisaged
by the NCA). In
confirmation hereof the applicant relies upon a consumer profile
report issued by a Credit Bureau, in which it
is reported that the
respondents have applied for debt review.
The credit bureau
reports reflect merely that the consumer (the relevant respondent)
has applied for a debt rehabilitation or
to be placed under debt
review with a registered debt counsellor. No further details
regarding the application for debt review
are supplied, save that
the application was made on the 23
rd
of March 2011.
At the hearing of the
applications I requested counsel to address me on the question as to
whether an application for debt review
constitutes an act of
insolvency and whether the applicant has established that an act of
insolvency in terms of section 8(g)
of the Insolvency Act has been
committed.
Mr
De Vos
, who
appeared for the applicant in both matters, submitted that an
application to be placed under debt review in terms of section
86 of
the NCA constitutes an act of insolvency in terms of section 8(g) of
the Insolvency Act. He further argued that the available
evidence
establishes that such an application was in fact made and
accordingly that each of the respondents has thereby committed
an
act of insolvency entitling the applicant to move for the
sequestration of their respective estates.
In support of his
submissions Mr
De
Vos
referred
to the judgment of Wallis, J (as he then was) in
First
Rand Bank Limited v Evans
2
,
in which consideration was given to the question whether notice of
the fact that the respondent was under debt review constitutes
an
act of insolvency as envisaged by section 8(g) of the Insolvency
Act.
In the
Evans
matter the application
for a provisional sequestration was opposed. The applicant in that
matter relied upon a letter addressed
by the respondent to the
applicant in which the applicant’s attention is drawn to the
fact that the respondent had been
placed under debt review. The
learned judge, in dealing with the content of the letter addressed
to the applicant states the
following
3
:
“
[14]
The letter states that Mr Evans is under debt review. That means that
he must have applied for debt review in terms of section
86(1) of the
NCA. The purpose of his application was to obtain a declaration that
he was over-indebted because that is always the
purpose of applying
for debt review. In terms of section 79(1) of the NCA:
‘
A
consumer is over-indebted if the preponderance of available
information at the time a determination is made indicates that the
particular consumer is or will be unable to satisfy in a timely
manner all the obligations under all the credit agreements to which
the consumer is a party, having regard to that consumer’s (a)
financial means, prospects and obligations; and (b) probable
propensity to satisfy in a timely manner all the obligations under
all the credit agreements to which the consumer is a party,
as
indicated by the consumer’s history of debt repayment.’
It follows from this
statement of what constitutes over-indebtedness for the purposes of
the NCA that a debtor who informs his creditor
that he has applied
for, or is under, debt review is necessarily informing the creditor
that he is over-indebted and unable to
pay his debts.
[15] The proper approach
to adopt in determining whether a letter such as this constitutes a
notice of inability to pay in terms
of section 8(g) is to consider
how it would be understood by a reasonable person in the person of a
creditor receiving the letter.
In construing it the knowledge that
the creditor would have of the debtor’s circumstances must be
attributed to the reasonable
reader.”
The learned judge then
proceeded to deal with particular facts known to the applicant
regarding the respondent’s financial
circumstances and his
history of servicing such obligations at the time that it received
the letter from the respondent. He then
went on to state
4
:
“
[20]
The requirements of section 8(g) are satisfied when the notice given
by the debtor to the creditor conveys that the debtor
is at present
unable to pay his or her debts. The debtor’s willingness to
attempt to pay the debts in the future is not relevant.
As Scott, J
pointed out in
Standard
Bank of SA Ltd v Court, supra
,
‘…..’ ‘a debtor who gives notice that he
will only be able to pay his debt in the future gives notice
in
effect that he is ‘unable’ to pay. A request for time to
pay a debt which is due and payable will, therefore, ordinarily
give
rise to an inference that the debtor is unable to pay a debt and such
a request contained in writing will accordingly constitute
an act of
insolvency in terms of section 8(g). This is particularly so where
the request is coupled with an undertaking to pay
the amount due and
payable by way of instalments …. A distinction must, however,
be drawn between an inability to pay and
an unwillingness to pay. If
a reasonable person in the position of the creditor to whom the
notice is addressed would understand
the notice to mean that while
the debtor was unwilling to pay his debt forthwith he could
nonetheless do so if pressed, then the
notice will not constitute an
act of insolvency … In each case where there is a request for
time, the enquiry, therefore,
is whether the content of the written
statement, viewed together with the circumstances to which it may be
permissible to have
regard, is such as to negative the inference
arising from the request for time to pay and to justify the
conclusion that the debtor
would be able to pay at once if pressed to
do so.’
[21] Mr Evans was asking
for time to pay. He was also conveying that he wanted to pay his
debts other than in accordance with his
existing contractual
obligations in consequence of their being rearranged by way of court
order in terms of section 87 of the NCA.
That he was conveying
unequivocally that, at the time of the letter, he was unable to pay
his debts is in my view clear.”
Wallis, J on this basis
went on to find that the letter addressed to the applicant
constituted an act of insolvency by the respondent
in terms of
section 8(g) of the Insolvency Act.
The learned judge dealt
with two further arguments put forward. The first of these concerned
the question whether section 8(g)
of the Insolvency Act ought to be
interpreted differently in the light of the enactment of the NCA. It
was contended that a debtor
who applies for debt review and thereby
invokes the machinery of the NCA necessarily places himself in the
invidious position
of thereby committing an act of insolvency. For
this reason and in order to give effect to the purpose of the NCA
section 8(g)
should be interpreted as to exclude an application made
for debt review in terms of the NCA. In dealing with this argument
Wallis,
J pointed out, correctly in my view, that had it been
intended by Parliament to exclude an application for debt review
from the
ambit of section 8(g) of the Insolvency Act specific
provision would have been made in the NCA for that exclusion. It was
further
pointed out that there is nothing in the NCA to suggest that
such an interpretation of section 8(g) is warranted.
The second issue
concerned whether the effect of the NCA is to preclude a credit
provider from bringing an application for the
sequestration of the
debtor’s estate. As pointed out by Wallis, J this issue has
been authoritatively decided by the SCA
in
Naidoo
v ABSA Bank
5
where,
inter
alia
,
that court expressly approved the reasoning in
Investec
Bank Ltd v Mutemeri
6
.
Mr
De
Vos
urged
upon me the submission that the
Evans
judgment is clear
authority for the proposition that the fact of an application for
debt review constitutes an act of insolvency
which falls within the
ambit of section 8(g) of the Insolvency Act. On this basis it was
contended that proof of that fact is
sufficient to enable an
applicant to rely on the provisions of section 8(g). My attention
was however drawn to the unreported
judgment in
Nedbank
Ltd v Maxwell
in
which a contrary view appears to have been favoured
7
.
The submission made by
Mr
De
Vos
is
without merit. The
Evans
judgment is, in my view,
not authority for the general proposition that the mere fact of an
application for debt review in terms
of the NCA constitutes
compliance with the provisions of section 8(g) of the Insolvency
Act. The finding that an act of insolvency
had been committed by the
respondent in the
Evans
matter turned upon the
delivery by the respondent to the applicant (the creditor) of a
written notice drawing to the attention
of the applicant that the
respondent had been placed under debt review, and, given the
particular facts of the
Evans
matter,
the reasonable
interpretation of that written notice by the applicant creditor.
Wallis, J did not find that notice of the mere
fact of an
application for debt review constitutes written notice of inability
to pay a debt as required by section 8(g). Indeed
if regard is had
to Wallis, J’s reliance on the dictum of Scott, J in the
Court
matter (a dictum
approved on appeal in
Court
v Standard Bank of South Africa Ltd
8
)
then it is apparent that Wallis J’s approach to the
application of section 8(g) is consistent with a long line of
authorities
which require that a court, in construing a written
notice purporting to be a notice in terms of section 8(g), is
required to
consider the terms of the written notice and, where
appropriate, the appropriate circumstances in which that notice is
given
to a creditor. (See in this regard
Barlows
(Eastern Province) Ltd v Bouwer
1950(4)
SA 385 (E) at 390;
Shaban
& Co. (Pty) Ltd v Plank
1966(1)
SA 59 (O);
Rodrew
(Pty) Ltd v Rossouw
1975(3)
SA 137 (O);
Du
Plessis en ‘n Ander v Tzerefos
1979(4)
SA 819 (O);
Optima
Fertilizers (Pty) Ltd v Turner
1968(4)
SA 29 (D); and
Court
v Standard Bank of SA Ltd
;
Court v
Bester NO & Others
1995(3)
SA 123 (A)).
A careful reading of the
Evans
judgment indicates that this is the basis upon which
Wallis, J considered the content of the letter. The letter had been
addressed
by the respondent in that matter to the creditor
indicating, in the first instance, that he had been placed under
debt review
and secondly requesting that the debit order operative
on his banking account (in terms of which he was then servicing his
liability
to the creditor) be cancelled. The content of this written
notice given by the debtor to the creditor was interpreted by
Wallis,
J in the light of facts and circumstances known to the
creditor at the time that it received the letter and on this basis
it
was found that the letter constituted an act of insolvency as
envisaged by section 8(g) of the Insolvency Act.
Wallis, J was not called
upon to decide whether the mere fact that an application had been
made for debt review in terms of the
NCA constituted an act of
insolvency and he made no such finding.
Wallis, J’s
consideration of the effect of an application to be placed under
administration in terms of section 74 of the
Magistrate’s
Court Act, and the principle authority relevant thereto, occurred in
the context of evaluating a further argument
raised by the
respondent in the
Evans
matter; namely that the policy
considerations underlying the enactment of the NCA favour the view
that an application for debt
review ought not to be construed as
evidencing an act of insolvency. Wallis, J’s remarks are to
the effect that a debt
review is not in a novel position since
applicants for administration orders are in precisely the same
position are, in my view
obiter. Wallis, J did not find that an
application for debt review in terms of the NCA,
ipso facto
,
constitutes an act of insolvency.
Nor in my view is it to
be suggested that the judgment in
Madari
v Cassim
9
is authority for such a
proposition. In that matter Caney, AJ (as he then was) stated
10
that:
“
The
act of insolvency committed by the respondent is the very fact of
making his application for an administration order. He has
applied
for it as a debtor unable to liquidate his liabilities and having
insufficient assets capable of attachment to satisfy
such
liabilities. In doing this he has necessarily given notice in writing
to all his creditors that he is unable to pay any of
his debts, and
this is an act of insolvency within
section 8(g)
of the
Insolvency
Act, 24 of 1936
. Administration orders under
section 74
of the
Magistrate’s Court Act have been described, I think correctly,
by the learned authors of Jones & Buckle on the
Civil Practice of
the Magistrate’s Courts, as a ‘modified form of
insolvency’. This is designed, it seems to
me, as a means of
obtaining a
concursus
creditorum
easily,
quickly and inexpensively, and is particularly appropriate for
dealing with the affairs of debtors who have little assets
and income
and genuinely wish to cope with financial misfortune which has
overtaken them. Creditors have certain advantages under
such an
order, including the appointment of an independent administrator and
the opportunity of examining the debtor. They are
not debarred from
sequestrating the debtor if the occasion to do so arises.”
The decision in
Madari
however did not turn upon a determination of the question whether
notice of intention to apply for administration in terms of
section
74
constituted an act of insolvency. That issue, namely the fact
that an act of insolvency had been committed, appears to have been
common cause in
Madari
. The judgment in
Madari
turns
on the question as to whether an advantage to creditors was
established.
The procedure by which a
debtor can apply for an administration order, in terms of
section 74
of the Magistrate’s Court Act, involves a materially different
procedure to that now provided by the NCA. In terms of
section 74
(even prior to its more recent amendments) a debtor who was unable
to meet his or her financial obligations or is unable to satisfy
a
judgment debt could move a Magistrate’s Court for an order
placing the estate under administration. This procedure constitutes
a “modified form of insolvency” applicable to small
estates in which a
concursus
creditorum
is
created allowing for a court sanctioned debt rearrangement
11
.
The application to be
placed under administration required submission of a detailed
statement of affairs setting out the financial
affairs of the
applicant; confirmation of the correctness of the information under
oath; a motivation as to the basis upon which
the applicant is not
able to meet his or her financial obligations and
importantly
,
delivery of a notice of the application to creditors.
The application itself
therefore meets the particular requirements of
section 8(g)
of the
Insolvency Act, namely
notice in writing delivered to a creditor in
which the debtor states that he or she is unable to meet his
financial obligations.
Thus insofar as the
authorities relating to applications for an administration order in
terms of
section 74
of the Magistrate’s Court Act suggests
that the mere application fulfils the criteria of
section 8(g)
these
authorities are to be read in the context of the particular
procedure by which an administration order is sought.
Notwithstanding this the
authorities nevertheless maintain that in construing the notice to
the creditor, upon which reliance
is placed in sequestration
proceedings, the whole content of the application (for an
administration order) should be considered
in order to ensure that
the requirement that the notice conveys an unequivocal statement of
inability to pay is met and that
the creditor receiving the notice
can reasonably conclude that the debtor is unable rather than merely
unwilling to pay his or
her debts. (See
Barlows (Eastern
Province)
(
supra
);
Shaban
(
supra
);
Rodrew
(
supra
)).
The procedure by which a
consumer (or debtor) applies for debt review in terms of the NCA is
different to that envisaged by
section 74
of the Magistrate’s
Court Act.
Section 86
of the NCA (read with
regulation 24
of the
Regulations promulgated in terms of the NCA) posits an application
made by the consumer to a registered debt counsellor.
The consumer
does so by submitting Form 16 and supplying certain specified
documents and information to the debt counsellor.
Upon receipt of
the application the debt counsellor is required within a stipulated
period to issue to all credit providers identified
in the
application a notice in the form of Form 17.1 in which the credit
provider is informed that an application for debt review
has been
received. The application submitted by the debtor (ie. the
information contained in Form 16) is not provided to the
credit
provider. Once the debt counsellor has made a determination (which
is to be made within a stipulated period) the debt
counsellor is
obliged to issue a further notice to creditors in accordance with
Form 17.2 in which notice is given of the outcome
of the
application. This involves either rejection (if it is found that the
debtor is not over-indebted as envisaged by
section 79
of the NCA)
or a declaration of over-indebtedness and a referral to a magistrate
for purposes of debt restructuring.
The application for debt
review in terms of
section 86
accordingly does not involve notice
given by the debtor to the creditor in which the debtor declares an
inability to pay one
or more of his or her debts. A notice of
inability to pay a debt envisaged by
section 8(g)
must be given
deliberately and with the intention of giving such notice
12
.
The notice must be such that upon its receipt the recipient creditor
can reasonably conclude that the debtor is unable to pay
his or her
debts. If the words of the notification do not convey an unequivocal
statement of inability to meet a debtor’s
obligation, the fact
that the creditor may have construed the notice in that manner does
not render the notice one in terms of
section 8(g)
of the
Insolvency
Act
13
>.
In this instance the
applicant does not rely upon any written communication addressed to
it by the respondents. The written notice,
it is contended, is
constituted by the profile report issued by the credit bureau
reflecting that the respondents made application
for debt review in
terms of the NCA.
This profile report
provides no details of the terms of the application for debt review;
contains no reference to statements and
declarations made by the
debtor and contains no information upon which a creditor may
determine that the debtor is indeed unequivocally
stating an
inability to pay. In my view this does not constitute a written
notice envisaged by
section 8(g)
of the
Insolvency Act.
The
applicant in this
matter is constrained to rely upon inferential reasoning. So it is
argued that since the very basis upon which
a debt review is sought
is the existence of over-indebtedness, the fact that a debtor has
sought such a declaration is indicative
of the fact that the debtor
is declaring an inability to pay one or more of his or her debts. In
my view such inferential reasoning
is not only unsound it is
contrary to the express requirements of
section 8(g)
of the
Insolvency Act which
require written notice by a debtor to the
creditor of inability to pay his or her debts.
There is of course the
further difficulty,
namely
that the written notice upon which the applicant relies is one
communicated by a credit bureau rather than by the debtor.
Credit
bureaux are registered entities which engage in the business of
trading information in a credit market regulated by the
NCA. These
bureaux provide a service to both consumers and credit providers by
providing information retained for that purpose.
There is no
suggestion on the papers that the relevant credit bureaux were
authorized by the respondents to make any declarations
on behalf of
the respondents nor that they hold such general authority in regard
to the affairs of the respondents such as would
bind the respondents
by any declarations made by the credit bureaux. In
Eli
Spilkin (Pty) Ltd v Mather
14
Kannemeyer, J held
15
that:
“
If
an agent, on behalf of a debtor, writes a letter which amounts to an
act of insolvency in terms of
section 8(g)
of the Act the court must
be satisfied that the principal knew that the letter was being
written in those terms and consented to
it being so written.”
This statement of legal
principle relates to the circumstance where the act of insolvency is
committed “through an agent”
(compare
Walsh v Kruger
1965(2) SA 756 (E) and
Meyer en Kie v Maria
1967(3) SA 27
(T)). An act of insolvency can however also be committed by an agent
in the management of the principal’s
affairs (as was the case
in the
Eli Spilkin
matter). However in that circumstance it
is necessary to establish that the agent acted within the scope of
the general authority
to manage the affairs of the principal and
that the particular act of declaration was made within the scope of
that authority.
(See also
Chenille Industries v Vorster
1953(2) SA 691 (O) at 698 A – F;
Goldblatt’s
Wholesalers (Pty) Ltd v Damalis
1953(3) SA 730 (O) at 734 A –
C).
There is no basis in
this matter to find that the credit bureaux acted on the basis of
authority specifically conferred by the
respondents nor on the basis
of any general authority which could bind the respondents. It can
also not avail the applicant to
contend that the information
published by the credit bureaux is evidence of the existence of a
Form 16 declaration made by the
respondents and that such a
declaration in the ordinary course must of necessity amount to a
declaration of inability to pay.
As I have already indicated that
would extend the reach of
section 8(g)
of the
Insolvency Act way
beyond its purpose.
It was suggested in
argument that the evidence of the commission of the act of
insolvency tendered by the applicants is the best
available since
the applicant was not served with a Form 17.1 notice and does not
have access to the content of the Form 16 application
made by the
respondents. That may indeed be so but it is not sufficient. An
applicant who seeks to invoke the provisions of the
Insolvency Act
must
prove either that an act of insolvency as specifically provided
by the Act has been committed or that the respondent is actually
insolvent. If the applicant is not able to do so it cannot succeed
with the sequestration order.
It follows therefore
that the applicant has failed to establish that the respondents
committed an act of insolvency in terms of
section 8(g)
of the
Insolvency Act. As
I have previously stated the application papers
do not set out any other basis upon which such an order may be
granted.
It accordingly follows
that the applications must fail. In the light of this finding it is
unnecessary for me to deal with any
of the other requisites for the
granting of a provisional order of sequestration.
I make the following
order:
The applications under
case numbers 3846/2011 and 3847/2011 are dismissed.
__________________________
GG GOOSEN
JUDGE OF THE HIGH
COURT
APPEARANCE
:
FOR THE APPLICANT
:
Mr De Vos, instructed by
Greyvensteins Attorneys
1
The
allegation was made in both applications that the immoveable
property is owned by and registered in the name of the respective
respondents. The document purporting to evidence this in the
application brought under case no. 3847/2011 (the application
against Azelle Janse Van Rensburg) reflects a Deeds Office search
indicating that the immoveable property is registered in the
name of
her husband Heinrich Janse Van Rensburg.
2
2011(4)
SA 597 (KZD).
3
At
para 14 – 15.
4
At
para 20 - 21.
5
2010(4)
SA 597 (SCA).
6
2010(1)
SA 265 (GSJ).
7
Reference
to the unreported judgment (SGJ case number 18027/2010) is to be
found in Scholtz
et al
Guide
to the National Credit Act, 11 - 59. Regrettably Mr
De
Vos
was unable to obtain a copy of the
judgment. I too, have not been able to source a copy of the
judgment.
8
1995(3)
SA 123 (A).
9
1950(2)
SA 35 (D).
10
At
page 38.
11
The
characterisation of the administration procedure as a modified form
of insolvency was first made in Jones & Buckle the
Civil
Practice of the Magistrate’s Courts in South Africa 5
th
Edition (1946) a designation approved in
Madari
v Cassim
(
supra
)
at 38 and more recently in
Weiner NO v
Broekhuysen
2003(4) SA 301 (SCA) at
para 3.
12
See
Mars the Law of Insolvency in South Africa 9
th
Edition
page 97 and the authorities there cited.
13
Mars
(
supra
) at page 99;
Barlows (Eastern Province) (Pty) Ltd
(
supra
);
Optima Fertilizers Ltd v Turner
(
supra
)
at 33 D.
14
1970(4)
SA 22 (E).
15
At
24 (A-B).